Release Date: May 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- REX American Resources Corp (REX, Financial) reported a 4% increase in ethanol sales volume, reaching 74.5 million gallons in Q1 2024 compared to Q1 2023.
- The company achieved the second most profitable first quarter in its history, driven by lower natural gas and corn input prices.
- REX American Resources Corp (REX) has maintained a streak of 15 consecutive profitable quarters.
- The construction of the One Earth Energy carbon capture facility and ethanol production capacity expansion is progressing well, with completion expected by the end of the year.
- The company ended the quarter with $351.8 million in cash, cash equivalents, and short-term investments, and no bank debt.
Negative Points
- The pricing environment for both ethanol and co-products was weaker, impacting overall revenue potential.
- There are delays expected in connecting the carbon capture facility to the electric utility, pushing the timeline to the fourth quarter of 2024 at the earliest.
- The company faces uncertainties and delays in obtaining necessary permits for the carbon capture and sequestration project.
- Planned maintenance at the NewGen and One Earth facilities is expected to impact production and increase associated expenses in the second quarter.
- Despite the approval of year-round E15 sales, the lack of E15 pumps remains a significant barrier to increasing ethanol demand.
Q & A Highlights
Q: Can you provide an update on the timeline for the EPA well approval?
A: We received approximately 25 to 26 questions from the EPA, which we plan to answer by this Friday. The technical review will continue, and we expect approval by Q1 of 2025 at the latest. However, we still need pipeline approval and local permits, so we can't give an exact date for when we expect to be operational. (Zafar Rizvi, CEO; Stuart Rose, Executive Chairman)
Q: What is the timeline for the permit submission to increase the One Earth facility's capacity to 200 million gallons?
A: Once the facility expansion to 175 million gallons is completed, we will conduct stack testing related to greenhouse gases. After qualifying from these tests, we can apply for the 200 million gallon permit from the EPA. (Zafar Rizvi, CEO)
Q: How long will it take to reach full injection capacity once the EPA approval is received?
A: After receiving EPA approval, it will take approximately three to four months to complete the well and start injection. However, this timeline depends on obtaining other necessary approvals, such as pipeline permits. (Zafar Rizvi, CEO; Stuart Rose, Executive Chairman)
Q: What is the status of your dialogue with prospective CO2 injectors for the plant?
A: Our primary focus is on completing our own facility and obtaining all necessary permits. Once operational, we may explore other opportunities, but our current priority is our own project. (Zafar Rizvi, CEO)
Q: What are your latest thoughts on year-round E15 sales?
A: While there have been improvements and ongoing discussions, we haven't seen a significant increase in demand yet. The availability of E15 pumps remains an issue even if year-round sales are approved. (Zafar Rizvi, CEO; Stuart Rose, Executive Chairman)
Q: How will the One Earth facility expansion affect industry capacity and demand?
A: The impact on overall supply will depend on various factors, including the location of plants and their supply routes. Our focus is on increasing our production capacity to 200 million gallons. (Zafar Rizvi, CEO)
Q: What factors contributed to the strong performance of unconsolidated affiliates?
A: Increased interest rates on cash and cash equivalents, along with a rare occurrence of $1.2 million in patronage income at our Nugent facility, contributed to the strong performance. (Zafar Rizvi, CEO)
Q: What are your expectations for the ethanol and co-product market in the second quarter and the remainder of 2024?
A: We saw a decline in product pricing in Q1 but expect a pricing recovery in Q2. We anticipate positive margins and earnings, though planned maintenance will impact production and increase expenses. (Zafar Rizvi, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
